Slowdown bites retail sector, sales fall to 11 percent

New Delhi: Hit by the economic slowdown, the country's retail sales growth sharply fell to 11 percent in December 2008 from 34 percent in the like period of 2007, according to a study by global consultancy KPMG.

"Falling footfalls and poor conversion ratio have led to a decline in sales growth to 11 percent in December 2008 compared to 34 percent in December 2007," said the KPMG report, 'Indian Retail: Time to change lanes', released Tuesday.

Factors like store rationalisation, working capital management, regionalisation, cost optimisation and manpower resizing are some of the key "top of mind" issues for the retailers in the current context, KPMG said.

The study added that the the slowdown was likely to last 12-18 months, but dependent on the government policies.

It urged the government to increase spending on infrastructure and other development initiatives.

"We believe that players which take immediate strategic measures will be the dark horses. Be it store rationalisation, change of supply chain, consolidation of operations, improvement in IT infrastructure, retailers need to think quick to protect their margins," KPMG global head of markets Neil Austin said.

The retail sector is also bearing the brunt of the liquidity crunch, the study said.